February 21, 2017 Articles

When Is the Sale Price Not Equal to Fair Value?

Delaware courts look at transaction price or expert evidence, or both, to determine fair value in appraisal rights cases.

By Boris J. Steffen and Joseph L. Meadows

After a corporate merger or acquisition, a dissenting shareholder may petition for the judicial appraisal of his or her shares. The shareholder is entitled to a recovery (sometimes with interest, depending on the jurisdiction) if the appraisal shows that the transaction did not provide fair value for the shares. All 50 states and the District of Columbia have some form of appraisal rights statute, with over half adopting provisions from the ABA's Revised Model Business Corporation Act. Delaware—where most companies are incorporated—has well-developed law in this area. And a number of recent Delaware decisions have addressed the relevance of the transaction price and importance of expert analysis in appraisal rights litigation. E.g., Merion Capital L.P. v. Lender Processing Servs., Inc., 2016 WL 7324170 (Del. Ch. Dec. 16, 2016); Dunmire v. Farmers & Merchs. Bancorp of W. Pa., Inc., 2016 WL 6651411 (Del. Ch. Nov. 10, 2016); In re Appraisal of DFC Glob. Corp., 2016 WL 3753123 (Del. Ch. July 8, 2016); In re Appraisal of Dell Inc., 2016 WL 3186538 (Del. Ch. May 31, 2016); Merion Capital LP v. BMC Software, Inc., 2015 WL 6164771 (Del. Ch. Oct. 21, 2015).

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